Bayer’s Monsanto acquisition to face politically charged scrutiny

As the global agricultural sector races to consolidate, Bayer AG's $66 billion all-cash deal to acquire Monsanto Co will test growing political and consumer unease in the United States and abroad over the future of food production.

Bayer’s pesticide-focused agricultural business has few overlaps with Monsanto's dominant seed franchise, according to the companies' executives. Still, marrying two of the world's top farm suppliers at a time when rivals are also merging is fuelling concern over reduced competition in the $100 billion global market.

Roger Johnson, president of the Farmers Union and former agricultural commissioner for North Dakota, said some farmers may not want to bite the hands that feed them by opposing the mergers.

“There’s a real trepidation,” he said. “If you’re a farmer who’s a seed dealer, and you’re marketing whatever brand, and you’re quoted as saying something about that company, maybe you’re no longer a seed dealer anymore. I can’t tell you that that’s happening, but that’s the fear.”

David Balto, a former policy director of the Federal Trade Commission who now counsels companies on antitrust matters, says it would create less rivalry in the broader marketplace. “It’s going to create an agriculture-chemical giant substantially larger than anyone else,” Balto says,

CLSA analyst Mark Connelly, “I’ve been pretty clear that I think these deals are outrageously uncompetitive.” Nor does he believe will it fly with farmers. He wrote in a note in July that, “handing control of the U.S. seed supply to China and Germany will not be acceptable to the U.S. farm industry, and neither will combining the most powerful seed and pesticide companies.”

Senator Bernie Sanders, who recently ended a run for the Democratic presidential nomination, called the deal "a threat to all Americans."

U.S. Senate Judiciary Committee Chairman Chuck Grassley has called a hearing next Tuesday to scrutinize the wave of consolidation. Farmers in Iowa, the Republican senator's home state, are worried that seed and chemical costs are rising while grain prices are near their lowest levels in years. Farm incomes have plunged. “Iowa farmers who I’ve spoken with are worried about rising input costs, especially in an increasingly weak agriculture economy," said Senator Chuck Grassley, an Iowa Republican. "Today’s announcement will only heighten those concerns."

Senators Mike Lee and Amy Klobuchar, the two top antitrust lawmakers, also expressed concern. "The transaction has the potential to result in a significant loss of competition and reduced incentives and ability to innovate, thereby raising prices," said Lee, a Republican from Utah.

Craig Brown, a vice president of the National Cotton Council of America "I would have to say this: I think there will be some concern from the growers because of the consolidation."  Brown said the council had taken no formal position on the proposed deal.

Harwood Schaffer, an agricultural economist at the University of Tennessee. "They’re going to get stuck with high prices and no competitors," said "At some point there needs to be a shift in government policy toward these mergers."